Copyright infringement claims arising from commercial contracts are arbitrable unless they purely involve rights in rem.

The Plaintiff, an IT maintenance service provider, alleged that Defendant Nos. 2 and 3 (former directors of the Plaintiff) orchestrated a scheme to divert over 115 client contracts and proprietary software to Defendant No. 1 (TPM Guru)

The Plaintiff claimed these actions involved copyright infringement of its software and were facilitated by a "fabricated" Collaboration Agreement dated 28.01.2020 and an Exit Agreement dated 30.04.2021

The Defendants moved an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking to refer the dispute to arbitration based on Clause 7 of the Collaboration Agreement and Clause 9 of the Exit Agreement

The Plaintiff resisted, arguing the dispute involved non-arbitrable rights in rem (copyright) and that several defendants were non-signatories to the agreements

1. Whether the dispute involving allegations of copyright infringement and diversion of business is ex-facie non-arbitrable

2. Whether the presence of non-signatory defendants and the overlap of multiple agreements precludes a reference to arbitration under Section 8 of the Act

The Court primarily applied Section 8 of the Arbitration and Conciliation Act, 1996, which mandates referring parties to arbitration if a valid agreement exists

It relied on the "prima facie" test established in Vidya Drolia v. Durga Trading Corporation, holding that courts should only interfere to weed out "deadwood" or manifestly invalid agreements

The court further applied the "Group of Companies" and "veritable party" doctrines from Cox & Kings Ltd. v. SAP India (P) Ltd., which allows binding non-signatories based on their involvement in the negotiation or performance of the contract

Regarding arbitrability, it distinguished between sovereign grants of IP rights and inter-party disputes as clarified in Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899, In re

The Court observed that the dispute was deeply rooted in the commercial relationship defined by the Collaboration Agreement, which handled the sharing of infrastructure and software

It rejected the Plaintiff's argument that copyright claims are inherently non-arbitrable, noting that the Plaintiff was seeking reliefs in personam against the Defendants rather than a sovereign declaration of title

The Court held that under the Kompetenz-Kompetenz principle, the Arbitral Tribunal is the appropriate forum to decide complex questions of substantive validity and non-arbitrability

Addressing the "non-signatory" objection, the Court applied Cox & Kings, stating that the close relationship between the parties and the composite nature of the transaction suggested the non-signatories were not strangers to the dispute

Finally, it ruled that the Plaintiff could not defeat an arbitration clause by simply impleading non-signatories or mixing causes of action involving the Exit and Collaboration agreements

The Court referred the parties to arbitration under the Collaboration Agreement while leaving all questions regarding the merits, the status of non-signatories, and the validity of the agreements to be decided by the Arbitral Tribunal

Consequently, the Civil Suit and all pending applications were disposed of